When Members of the Criticaleye Community were asked to diagnose the health of the relationship between banks and business, it seems that, while not exactly terminal, some serious rehabilitation is needed. The main themes that emerged include a need for quicker decisions, less box-ticking, greater competition among banks, more time for banks to understand businesses, and better preparation by businesses. Both banks and businesses need to improve communication and work on rebuilding trust in the relationship.

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balanced judgments rather than box-ticking.
Fundamentally, banks must remember
the lessons of the last few years: lending
indiscriminately will create problems.”
A lack of flexibility is also a major gripe.
Chris Merry, former CEO of financial
The nature of the relationship between
banks and businesses has undoubtedly
changed since the financial crisis of 2008.
Businesses now require different things
from banks and the current assessment
process is often viewed by management
teams as laboured, draconian and arbitrary.
Kevin Appleton, former CEO of equipment
hire company Lavendon Group plc,
says: “The challenge in the UK is how
concentrated the commercial lending
sector is, where you only have four or five
lenders to choose from. I’d like to see more
competition in lending and a return to

2. www.criticaleye.net 02
institution Matrix Group, says: “Following
the credit crunch, Matrix’s bank manager
walked in and said that the overdraft rate you
had of £2,000 a year will now be £20,000 a
year; we’ve been undercharging you and this
is what head office is demanding. There’s
no room for negotiation. It’s enough to
make anyone think of changing banks.”
Plastics Capital, an AIM-listed small to
medium-sized enterprise (SME), took such
a decision in 2011. Executive Chairman,
Faisal Rahmatallah, says: “Prior to re-
banking with Barclays Corporate, Plastics
Capital was with RBS. The relationship
was fraught because during the crisis RBS
initially pooled the business into a client set
that was inappropriate, then allocated it to
Project Rainbow [part of its restructuring
strategy] under which the loan was one
of many assets earmarked to be sold to
Santander, per EU anti-competition ruling.”
The switch is proving fruitful: “[Barclays]
has been prepared to help with
finance for growth and the terms of
the re-banking were reasonable given
market conditions,” adds Faisal.
Judgment deficit
A rational and transparent approach to
lending ranks high on the wish list of leaders
of both large and small concerns. Bernie
Waldron, a Criticaleye Associate and Non-
executive Director of various companies, says:
“Although there are a number of excellent
bank managers that deal with smaller
businesses, there are also plenty that struggle
to understand their client’s business and
marketplace, making it difficult for them to
make intelligent judgments on whom to back.
“Prior to the economic downturn in 2008,
when bank financing was perhaps a more
mechanical task, I think the banks may have
under-invested in people who can relate
to the complexities faced by SMEs. Often,
the business insight of the bank’s ‘point
people’ who are taking decisions and making
recommendations up-the-line is not strong
enough. The fact that SME banking is normally
organised by geographic region rather than
client industry only exacerbates this issue.”
It’s a view conceded by Steve Pateman, Head of
Corporate, Commercial and Business Banking
at Santander, who comments: “We have kind
of lost sight in some ways of what banking is
all about. The very sales driven approach that
has embedded in a number of banks over the
last ten to 15 years is one of the reasons. In
some instances they’re not running a bank but
a sales organisation – a one-stop transaction...
[In contrast] a banking transaction is an
ongoing relationship and actually you can
determine the success of that relationship
by the time and effort you put into it.
“The focus on sales has meant the
understanding of the customer has been
replaced by systems and methodologies and
theory rather than practice. It’s resulted,
I think, in a lot of customers becoming
disconnected from an organisation that
is either trying to sell them something or
tell them that the reason they can’t borrow
money is because they’re in the wrong asset
class or their gearing ratios aren’t right.
They feel there isn’t a dialogue or any form
of connection... [So] it’s not just a loss of
knowledge, it’s a loss of an ability to talk
and have a conversation and listen.”
A lack of communication – the harbinger of
many a doomed relationship – has been a
persistent issue, with a significant number
of Criticaleye Members expressing real
frustration at simply not being able to talk
to their bank in order to explain properly
the position of their organisation in detail.
Ian Bowles, CEO of AIM-listed Allocate
Software, says: “While we haven’t had any
issues with our bank, I’m not sure banks spend
enough time understanding their clients’
businesses. If the debate is essentially about
funding growth, banks need to understand
the business drivers of their customers.”
Mary Jo Jacobi, Criticaleye Associate and
former advisor to Lehman Bros and the board
of HSBC, says: “Banks need to return to the
partnership approach they once had with
their business customers, where they had a
symbiotic relationship of trust and reliance.”
Blame culture
As much as it’s been the vogue to bash banks
in recent times, what doesn’t get discussed
is how numerous businesses are falling short
due to poor financial controls and plain
ignorance about what banks want to see.
Ian says: “The other side of the coin is that
business leaders need to be realistic and
sensible when putting forward business
plans, with demonstrable models and
tolerance levels. When we put forward an M&A
proposition, which the bank will review, we
We have kind of lost sight in some
ways of what banking is all about

3. www.criticaleye.net 03
have at least three scenarios built into the
model, so they can see the tolerances for
our ability to generate or repay cash. If
you haven’t considered the variants to the
plan, the banks will not see it as credible.”
In certain instances, companies are
failing to wise up and realise that times
have changed. Steve Pateman agrees:
“I would say [businesses] have to be a
bit more worldly-wise... it’s been the
banks’ fault as much as anything as
they’ve chased market share, pushed
prices down and risk appetite up.
It’s encouraged an attitude where
businesses expect to borrow money
at a certain price and capacity and it
shouldn’t be like that. Expectations need
to be more mature on both sides.”
Mark Stokes, MD of Large Corporates at
Lloyds TSB, comments: “There needs to be
a very good dialogue and a healthy sharing
of information between management
teams and banks; it makes banks feel they
understand the business. Banks will then
feel more comfortable when that customer
comes to them asking for backing for
M&A or an expansion opportunity, and
will be better placed to do it because
they have that in-depth knowledge.”
For Ian, the relationship has to be taken
seriously: “If a bank wants time in a CFO’s
diary, they should get it in equal measure
with investors or City analysts because
it’s a fundamental part of the business.
There should be no shocks either way: the
company shouldn’t default on payment
terms and conditions, but likewise, if a
bank has indicated support for growth,
perhaps through acquisition, you don’t
want to hit any roadblocks with paperwork
because the terms and conditions or
the environment has changed.”
Mark states that if the dialogue exists
then it’s easier to establish and set out
common goals. “Some corporates go about
it a different way,” he says. “They go to
the opposite extreme, looking at a bank
as more of a purchasing process, which
doesn’t support a long-term relationship
and sharing of information; therefore
banks might not be as willing to support
whatever it is that business is seeking to
do because they don’t really know them.”
A personal touch
The big challenge for many organisations,
not just in the financial services sector, is
to get closer to customers. Steve Cooper,
Managing Director, Barclays ¬¬¬- Business
and Personal Banking Solutions, Barclays
Bank, argues that significant steps have
already been taken in the past few years to
recalibrate the relationship with businesses:
“We’re being a lot more focused. When
we do refuse a loan we are very thorough
about how we communicate that decision to
the customer, both verbally and in writing.
It’s very different to pre-2008, when banks
were perhaps guilty of just saying ‘no’ or
the relationship manager would blame a
decision on head office. Now, it’s more
joined-up and the organisation will explain
the ‘no’ because of, say, these five reasons.”
Andy Tinlin, who heads up Accenture’s
financial services management consulting
practice dealing primarily with corporate and
SME banking groups, comments: “Banks are
definitely sharpening up their capabilities
in terms of how they deal with customers,
driven by having to reinvent revenue flows
to replace a drying up of their more risky or
speculative loans. This is the silver lining
on a really big cloud, and over the next
five years or so, I expect some of these
commercial banks to adopt a much more
customer-centric view of the world, meaning
the recruitment of people from other types
of industries to provide a better view of how
they should perceive their customer base.”
This can be seen as recognition on the part
of banks that improvements have to be
made. Andy says: “What this means for
businesses is, in theory, a more bilateral and
equitable relationship. However, banks must
be careful that they don’t simply appear to
be selling product. They must show genuine
interest in the business and its objectives
in the medium-term. Banks are a supplier
to businesses and, in the same way as any
When Members of the Criticaleye
Community were asked to diagnose
the health of the relationship between
banks and business, it seems that,
while not exactly terminal, some
serious rehabilitation is needed.
The main themes to emerge include:
• Quicker decisions
• Less box-ticking
• Greater competition (among banks)
• More time to understand a business
• Better preparation (by businesses)
We need to remain close
to our customers

4. www.criticaleye.net 04
other supplier, they must work to get the
time they need in their clients’ diary and work
hard to achieve better after-sale service.”
Steve Cooper clearly believes this is the way
forward: “We need to remain close to our
customers, remain transparent about costs
and offer them plenty of choice. We must also
become more efficient about informing our
clients before they incur fees and be more
creative about the lending options we’re
providing in the long run. However, it must
be sustainable; it’s important to remember
that banks are not charities. It’s not our
money but our shareholders’ money, so we
can’t be reckless with how we spend it.”
Reality cheque
Banks are – and ought to be – profit-
motivated and they shouldn’t be expected
to support businesses artificially if their
balance sheets don’t add up. David Molian,
Criticaleye Thought Leader and Director
of the Business Growth & Development
Programme at Cranfield, says: “Many
[management teams] have learned to
[control] their working capital much more
tightly and squeeze the cash they need from
their business. In that sense they are better-
managed businesses and, in the process of
improving their working capital position,
they have often improved margins as well.”
Geraint Anderson, CEO of mid-cap
business TT electronics, says: “Many mid-
cap companies like us have taken action to
improve their own performance and be less
reliant on bank debt. We’ve taken self-help
action in order to repair balance sheets
and see where we could improve cashflow,
debt position and working capital.”
In practice, the bottom line is that
struggling businesses are going to keep
finding it hard when banks are tasked with
simultaneously shrinking their balance
sheets while also being under political
pressure to lend responsibly. Paul Danos,
Dean of Tuck School Business School at
Dartmouth in the US, says: “I don’t see
much appetite to take even reasonable risks
on the part of banks and companies seem
to be in a stagnant period where there’s
not that much organic development.
“Given what the banks have gone through
in the last four years, their tremulousness
is understandable; and many say that US
companies are frozen by uncertainty about
taxes, regulations and other government
policies. In Europe, the rolling credit markets
with whole countries on the brink would instil
caution even in the proverbial drunken sailor.”
It’s another reason why management
teams have to be switched on when
approaching a bank for funding – the
days of easy money are long gone.
© Criticaleye 2011
Contactthecontributorsthroughwww.criticaleye.net
Featuring commentary from:
Geraint Anderson
CEO
TT electronics
David Molian
Criticaleye Thought Leader and
Director of the Business Growth &
Development Programme, Cranfield
Ian Bowles
CEO
Allocate Software
Faisal Rahmatallah
Executive Chairman
Plastics Capital
Paul Danos
Dean of Tuck School
Business School, Dartmouth, US
Andy Tinlin
Head of Financial Services
Management Consulting
Accenture
Kevin Appleton
former CEO
Lavendon Group plc
Steve Pateman
Head of Corporate, Commercial
and Business Banking, Santander
Steve Cooper
Managing Director
Barclays - Business and Personal
Banking Solutions, Barclays Bank
Mark Stokes
Managing Director
Large Corporates, Lloyds TSB
Mary Jo Jacobi
Criticaleye Associate
Bernie Waldron
Criticaleye Associate
Chris Merry
former CEO
Matrix Group